image: Balmain

image: Balmain

On the heels of reports earlier this year, Valentino’s owner, the Qatari Mayhoola investment fund, is set to acquire Balmain this week for more than 460 million euros ($522 million), according to a number of Reuters sources with first-hand knowledge of the matter. The deal, which could be announced as soon as Wednesday, marks the end of months of negotiations between the Qataris and Balmain investors, who include Sanofi co-founder Jean-Francois Dehecq and the family of former chief executive and controlling shareholder, the late Alain Hivelin. Dehecq is expected to resign from his post, while Emmanuel Diemoz, Balmain’s chief executive, will remain for an unspecified amount of time after the deal is finalized. 

Under the direction of Hivelin, Paris-based Balmain has become one of France’s biggest success stories, after narrowly escaping bankruptcy in 2004. The brand, which boasts pricey embroidered military-style jackets, deconstructed tees, and intricate mini-dresses, is one of the country’s last remaining major independent fashion labels along with Lanvin and Hermes. Operating mainly as a wholesale business with fewer than 10 flagships stores around the world and much of its revenues being derived from licensed goods, Balmain is slated for international expansion, as well as the development of an accessories line, under the terms of the impending agreement with Mayhoola.

The brand has been enjoying widespread international success, first under the creative direction of Christophe Decarnin from 2006 to 2011 and then under Olivier Rousteing, who was appointed as creative director in 2011, at the age of 25. Balmain generated some 130 million euros in sales in 2015, according to sources and enjoyed sales growth of some 25 percent – a stellar performance in light of the luxury goods downturn. Rousteing, who boasts more than 3 million followers on Instagram and regularly posts photos of his jet-set lifestyle and Balmain events, has his active role on social media to thank in large part for boosting the brand’s profile, especially since critics have not been shy to consistently give his collections less than stellar reviews each season. 

The final price that the parties have agreed upon in valuing Balmain, which is unlikely to be disclosed, will depend on how much cash the existing shareholders will take out of the company. The figure of 460 million euros would value Balmain at around 14 times earnings before interest, tax, depreciation and amortization (Ebitda), putting it at a premium to Gucci-owner Kering which is on 8-9 times and in line with expensive stocks such as Prada and Jimmy Choo,  the sources said. Mayhoola, an investment vehicle with close ties to Sheikha Mozah, the second wife of the former emir, has controlling stakes in Valentino, Italian tailor Pal Zileri, and British fashion brand Anya Hindmarch.

And speaking of Valentino … Italy’s Valentino Chief Executive Stefano Sassi ruled out a potential IPO listing for the fashion house this year and cast doubts on the possibility of a market debut in 2017. “There is no floating at the moment, this is not the right year, it’s too early,” he said speaking on Tuesday on the margins of a conference in Milan. Sassi said the designer still planned to list but, when asked about the possibility of an initial public offering in 2017, he said “Who knows.”